Job vacancy duration reflects the time a firm spends searching, selecting, and hiring for a job opening. Capturing vacancy duration using the creation and deletion dates of job postings by US public firms, we examine the informativeness of vacancy duration for future firm profitability. We find that while firms that quickly fill low-skill job vacancies exhibit higher future profitability, firms that take more time to fill high-skill jobs exhibit higher future profitability. Our cross-sectional analyses across the benefits and costs of candidate selection and performance expectations suggest that the informativeness of vacancy duration comes from its reflection of firms’ hiring strategies. That is, firms expecting higher profitability recruit more intensively to avoid the opportunity cost associated with vacancies for low-skill jobs and to ensure the selection of high-quality workers for high-skill jobs. Further analyses show that the implication of job vacancy duration for future profitability is not incorporated timely in the capital markets, as evidenced by pessimistic analyst forecasts and positive earnings announcement returns in future quarters for firms with short (long) durations for low-skill (high-skill) jobs. These results demonstrate the informativeness of job vacancy duration for firm profitability and advance the understanding of firms’ hiring strategies.

We conduct two experiments to investigate how investors react to attributions accompanying management guidance. In our first experiment, we find that investors provide lower earnings estimates when management attributes negative guidance news to external factors than internal factors. When the guidance news is positive, the locus (internal versus external) of the attributions has no effect on investors' earnings estimates. In our second experiment, we separate out the effect of the attribution's outcome controllability (controllable versus uncontrollable) from that of attribution locus in a negative guidance news setting. We find that investors provide higher earnings estimates for internal and outcome controllable attributions than for internal and outcome uncontrollable attributions attributions. Outcome controllability does not matter when attributions are external. Our study extends prior research by showing how the valence of management guidance and the characteristics of guidance attributions jointly influence investors' earnings judgments.

We conduct two experiments with experienced accountants to investigate how fair value accounting affects managers’ real economic decisions. In experiment 1, we find that participants are more likely to make suboptimal decisions (e.g., forgo economically sound hedging opportunities) when both the economic and fair value accounting impact information is presented than when only the economic impact information is presented, or when both the economic and historical cost accounting impact information is presented. This adverse effect of fair value accounting is more likely when the price volatility of the hedged asset is higher, which is a situation where, paradoxically, hedging is more beneficial. We find that the effect is mediated by participants’ relative considerations of economic factors versus accounting factors (e.g., earnings volatility). Experiment 2 shows that enhancing salience of economic information or separately presenting net income not from fair value remeasurements reduces the adverse effect of fair value accounting. Our findings are informative to standard setters in their debate on the efficacy of fair value accounting.

We examine the association between target firms' public non‐GAAP earnings disclosures and merger and acquisition (M&A) efficiency. This research question is important, given the widespread use of non‐GAAP metrics in M&A valuation and lack of evidence regarding the real effects of non‐GAAP disclosure. Public non‐GAAP disclosure can enhance bidders' ability to assess a target's core earnings and potential synergy, especially in the earlier stages of due diligence, and enable bidders to make better M&A decisions. We find that target firms' non‐GAAP disclosures are associated with greater M&A efficiency, greater synergies, and lower likelihood of post‐acquisition goodwill impairment. We also find some evidence that target firms' non‐GAAP disclosures are positively related to post‐acquisition operating performance. Further, we find modest evidence that the positive relation between non‐GAAP disclosures and M&A efficiency is stronger (1) for targets that are more difficult to value, (2) for targets with weaker information environments, and (3) when targets' non‐GAAP numbers are of higher quality. Overall, our evidence suggests that non‐GAAP disclosures help facilitate efficient resource allocation in M&As and are associated with real effects on corporate investment. Our evidence is potentially relevant to regulators' concerns about the usefulness of non‐GAAP metrics.

We examine the real effects of lease-capitalization rules (i.e., standards that require firms to capitalize finance leases) on corporate investment. We show that the introduction of these rules leads to a decrease in investment, which is more pronounced for firms with high reliance on leases. We posit and find that lease capitalization affects investment via a learning channel and a contracting channel. Regarding the first channel, we argue that managers identify areas of overinvestment and activities that should be discontinued or downsized because of the information they collect and analyze to comply with lease-capitalization rules. Accordingly, we find that the effect of lease capitalization is stronger when learning opportunities are higher. Regarding the second channel, we argue that lease capitalization affects investment via its effect on contracts. Accordingly, we document an increase in the likelihood of covenant breaches and a stronger decline in investment for financially constrained firms.

Cash flows play an important role in the accounting and finance literature. They are a major component of earnings, serve as a benchmark for earnings and accruals, and are an input to firm valuation. Although accrual measurement has been extensively studied, research on cash flow measurement remains limited. We review cash flow proxies researchers use in prior literature and highlight the importance of (1) identifying and defining the cash flow construct of interest based on the underlying research question and other constructs of interest and (2) selecting a cash flow proxy that minimizes measurement error and maps well into its construct. We also examine the challenges researchers face in measuring cash flows and demonstrate how measurement choices can affect the magnitude of coefficient estimates and statistical inferences. Finally, our study provides a framework researchers can follow to strengthen the construct validity of cash flow proxies.